The High Court has ordered The British owned currency-printing conglomerate Thomas De La Rue PLC has today suffered a major setback after the High Court ordered the firm to pay the Kenyan taxman Sh1.1 billion in a long-running tax dispute with the Kenya Revenue Authority (KRA).
“A Nairobi High Court has today ruled in favour of Kenya Revenue Authority (KRA) and ordered Thomas De La Rue to pay Sh1,106,043,698 in taxes. This is after De La Rue Currency and Security Print Company filed an appeal to challenge a previous ruling by Tax Appeals Tribunal (TAT) ordering the company to pay the taxes due.” KRA Leagal Services and Board Coordination department has said.
The desion by the court comes despite the UK-based firm applying diplomatic pressure on the new administration of President William Ruto to intervene in its favour in a row over Value Added Tax (VAT), where the firm insisted that it should not have been required to pay the sum. KRA had argued that the company cannot offset royalties to its parent company as an allowable expense.
However, De La Rue countered that it paid royalties to its parent firm for services rendered to it and that no taxes were due on its income.
Today’s High Court ruling upholds the 2021 judgment of the Tax Tribunal ordering the firm to pay taxes due.
On June 4, 2021, ruled that the company which is registered and earns income in Kenya, had signed a contract with Central Bank of Kenya (CBK) to print currency and could not offset royalties paid to its parent company De La Rue International as an allowable expense under Section 15(1) of the Income Tax Act.
The company had disputed that it paid royalties to De La Rue International for services rendered to it and therefore no taxes were due on its income.
KRA told the court that the company had entered into a contract with CBK and it bore significant risk in the contract. The Authority explained that there were no Intellectual Property Rights arising to warrant payment of royalties.
The High Court revoked the ruling by the Tribunal on the basis that the appeal was lacking in merit and there was no evidence to persuade it to overturn the Tribunal’s Judgment.